Lake House Short Term Rental (My Take from 2 years)

[Patrick Shea]

So I have been operating a Lake House Short Term rental for the last two years.  And I have been getting a lot of questions from friends, acquaintances, my own real estate agent, renters, etc.  So I put together an email that I send out to all of them describing how it works.  I figured since I went to all the trouble for them, it wouldn't take me much time to share it here as well.

First of all our motivation in getting the Lake House was our own use.  My wife and I partnered with my wife's sister and brother-in-law.  So we had to find a house that was a reasonable commute between Atlanta (where we live) and Charlotte, NC.  We landed on Lake Hartwell.  We knew we would at least need a 3 bedroom, 2 bath to support the four of us and future kids. We also knew that we couldn't afford to own it outright, so we had to figure out away to minimize our cost, that meant short term rental.

To understand what we could afford, we needed to do an analysis of the rental market for Lake Hartwell itself.  First thing we did was look at what where the renting seasons. In our case, Lake Hartwell's main seasons are Memorial Day through Labor Day.  A huge perk of Lake Hartwell is the Clemson Football Season. Being a Penn State Grad, I knew that being close to the Stadium (within 30 minutes) would help float the fall and you could count on 7 weekends a year.   We thought that we could probably get one full week and two weekends per month in the summer, all Clemson football weekends and a perhaps one weekend per month in the off season.

We then did a cursory search on VRBO and AirBnB to see what houses (something around the size that would fit our needs) would rent for so we could get a decent estimate of how much money we would bring in.

Then we went house shopping, which took a while. we worked with a real estate agent and purchased off the MLS. Originally our price was a little too low for what we wanted for our own use. So we went up a little in price and found the one that we liked. The process almost took us 3 years. That is what happens with vacation homes, they don't turn over all that often and most get passed down.

All the while we were looking, we kept looking at VRBO and AirBnB to watch rental rates. They don't display passed bookings and vacancies, only future ones. So you kind of have to keep your eye on them. Or you can reach out to other owners in the area to find out, they might not be as willing to share info.

Once we selected the house, we did a little calculation on how much it would cost a year to own the house. Pull the tax records for annual taxes, get a quote on insurance, assume numbers for utilities (internet, water, electric, trash, etc), estimate repair costs, VRBO annual fee is $500, and add in mortgage costs as well. Ours comes out to about $2000 in operating costs every month, it has been pretty steady at that for the last two years.

Before making the offer, we took our estimated money coming in from renting and subtracted the money coming out for operating costs to see how how close to break even we were. In our case, we still have to pay money in, we just call it expensive boat storage.

Our stats for the two years that we have had the place are: 99 days book in 2017, 100 days booked in 2018. We have about $24,000 in expenses every year and we take in around $18,000 in rents. So we are negative $6000 a year, but we attribute that to our usage cost.  Personally, we go once a month and each have a week long in the summer.  So if we were actually were to rent that much, we would definitely have to pay that $6000 or more.

So the Pros:

1. We use our lake house at least once a month.

2. We don't have to fully cover the cost of owning a lake house and some else is building our equity.

3. With the exception of two stays, everyone has been super wonderful.

4. There are some nice tax advantages to having a short term rental that you should discuss with your CPA, if you have one.

The Cons:

1. You have to be in constant communications, not that you are always answering questions or bookings, just that you need to answer quickly.  Luckily, in the days of smart phones the app notifies us, we get a text and an email. So it is hard to miss.

2. If you want to maximize rental income, you don't use it during holidays. Memorial Day, Labor Day, and July 4th are obvious money makers, but we have had Thanksgiving, Christmas, and New Years booked every year we have owned it.

3. You are going to get bad apples from time to time. They are few and far between, but they do make you question renting out your favorite place on earth.

4. Our neighbors aren't super excited that we do short term rentals. They all own their lake house outright or can afford the mortgage so they don't really fully understand. They may complain a little, but end up using your cleaning lady.

Tips:

1. Get a good cleaning crew to do turnover or hire a property manager. We have two good cleaning crews right now. The full cleaning fee goes to them.

2. Get a system that you can remotely change the pin codes with. We use Vera and installed it ourselves, because we are handy like that.

3. Use both VRBO and AirBnB, we get a majority of our summer and longer bookings through VRBO, we get more of our off season through AirBnB.  Calendar updating is key, we haven't gotten them to play nice together, so we are doing it manually

4. Get a google number, separate email, and set up separate VRBO and AirBnB profiles. We use gmail and set up a google number to that gmail account, this number can ring at any of our phones and text any of our phones. Also having separate accounts means that you can transfer over the accounts if you ever decide to sell the house.  We have some friends who had a short term in Florida that was a personal AirBnB account and they couldn't transfer it.

I know that this isn't necessarily a money making investment, but it wasn't intended to be.  It was trying to live a much better lifestyle without having to pay for it, so I think goal met.

Hopefully this helps others out there looking for a similar situation.  And if you are looking for more of a money making strategy, this will definitely help as well as the pros, cons, and tips apply to all situations.

Best of Luck!!